Net Metering

Net metering is a practice that encourages consumer investment in on-site electric generators – typically small-scale, renewable energy technologies. When a customer/generator is producing and consuming electricity at the same time, the laws of physics dictate that the electricity being produced flows to where it is being used. But what about when electricity is being generated and none is being consumed? In these instances net metering allows customer/generators to spin their meter backwards, in effect paying the customer/generator the retail rate for the electricity they generate but don’t immediately consume. If a customer generates more electricity than they consume over a period of time, they are typically paid for that net excess generation (NEG) at the utility’s avoided cost, or the wholesale rate.

Without net metering, small customer/generators usually have two meters, one measuring incoming electricity, for which they pay the retail rate, and one measuring the power they produce, for which they are compensated only at the utility’s avoided cost. Thus net metering provides a strong economic incentive for electricity customers to install on-site, small-scale, renewable generating capacity. We’ll get into the categories of net metering in text below, but here is a graphic representing all of them.

The Many Categories of Net Metering

A majority of states have some type of net metering programs. Most have some common characteristics, including a size limit for qualifying generators and a statewide limit of qualifying capacity (typically about .01% of a utility’s peak load). Compensation for NEG is typically at the wholesale rate that the utility pays for electricity.

Two states, Minnesota and Wisconsin, stand out from the crowd because their net metering rules allow participants to be paid the going retail rate for the net excess electricity they generate for each billing cycle. New Jersey and Colorado allow projects up to 2 MW to use net metering. The Sacramento Municipal Utility District also pays the retail rate for excess solar electricity generation.

Note: Dozens and dozens of states have enacted net metering rules. We are highlighting only a few of the more interesting ones here on our site. IREC is tracking state activities on net metering developments at this link.

Aggregate Net Metering

Aggregate net metering is an add on to net metering allowing a utility customer to aggregate consumption at all of their buildings/meters into a single amount that can be offset from on-site generation connected to any meter. Without aggregation, a customer can only offset energy use on an electric meter with generation connected to that specific meter.

It’s a crucial policy for large entities, like municipalities, which control many buildings with separate meters but may only have a few good sites for on-site generation like solar. Check out our map of states that allow aggregate net metering.

Virtual Net Metering

Virtual net metering is a step further than aggregate net metering. It allows the generation to be located off-site, often anywhere within the utility’s service territory but still be treated as though it is on-site for the purposes of off-setting electricity consumption. Read more about the policy and the 11 states that allow it on ILSR’s virtual net metering page.

More Information:

Aggregate Net Metering – Rules

In nearly every state, an electric customer can offset their own energy consumption with on-site power generation, such as a solar panel. But for larger electric customers, net metering has a hitch. In many states, the solar array (or other power generation) has to be attached to the same building (or meter) where the entity...

Net Metering – California

California's net metering law was established in 1995. There have been many modifications over the years including 3 separate bills enacted in 2005. The are many exceptions but, in general, the current rules allow on-site energy projects of up to 1 MW access to net metering. The combined capacity of net-metered systems may not exceed 0.5% of any utility's peak demand [except for SDG&E, which has a limit of 50 MW].… Read More

Net Metering – Minnesota

Only electric generators less than 40 kilowatts (kW) are eligible and include fossil fuel cogeneration facilities.There is no statewide limit on the amount of electricity that can qualify for net metering payments, all customer classes are eligible for the program, and all utilities are required to offer net metering.

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Net Metering – New Jersey

In 2004, existing net metering provisions were revised by the New Jersey Board of Public Utilities. Net metering is available for qualifying projects up to 2MW. Customers eligible for net metering own the renewable-energy credits (RECs) associated with the electricity they generate.… Read More

Net Metering – Selections from Other States

Here you find some selected rules and information on net metering in a variety of states including:  Massachusetts , Nevada, New York, Oregon and Vermont… Read More

Net Metering – Wisconsin

Wisconsin is the other state to offer the retail rate for net excess generation (NEG), but unlike Minnesota it does so only for electricity generated from renewable resources. For non-renewable generation the net energy rate is the utility's avoided cost of electricity production.… Read More

Updated: States Supporting Virtual Net Metering

Net metering is a common distributed renewable energy policy in the United States, allowing individuals to "turn back" their meter (and reduce their electric bill) by generating on-site electricity. But utility accounting systems typically prevent people from sharing the output from a single, common solar or wind project. Virtual (or group or neighborhood) net metering...